A Simple Low Risk Daily Strategy
As you can see, you have all the components of a good Forex trading system.
First, I decided that this was a swing trading system and we would trade it on the daily chart. Next, I use a simple moving average to help us identify new trends early on.
Stochastic helps us determine whether we can still enter a trade after a moving average crossover, and it also helps us avoid oversold and overbought areas. RSI is an additional confirmation tool that helps us determine the strength of a trend.
After figuring out our trade setup, we determined the risk for each trade. For this system, we are willing to risk 100 pips on each trade. Generally, the higher the time frame, the more risk you should be willing to take, as your gains will typically be greater than if you trade on smaller time frames.
Next, we clarified our entry and exit rules. At this point, we will begin the testing phase with manual backtesting.
Here is an example of a long trade setup:
If we go back in time and look at this chart, we see that according to the rules of our system, this would be a good time to go long.
In order to backtest, you need to write down your entry price, stop loss, and exit strategy. You can then move one candle at a time to see how the trade unfolds.
In this particular case, you'll get some nice points! You can buy yourself some great stuff after this deal!
You can see that when the moving averages cross in the opposite direction, this is a good time for us to exit. Of course, not every deal is going to look so sexy. Some may look like ugly heifers, but you should always remember to stay disciplined and follow the rules of your trading system.
This is an example of a short pending order for the So Easy It Ridiculous system.
We can see that our criteria are met as there is a moving average crossover, the Stochastic is showing downward momentum but has not yet entered oversold territory, and the RSI is below 50.
We will go short at this point. Now we will record our entry price, stop loss and exit strategy and then move the chart forward one candle at a time to see what happens.
The trend proved to be quite strong, with the pair losing almost 800 points before another crossover occurred! Now isn't that easy?
I know you may think this system is too simple to be profitable. The truth is, it's simple. You shouldn't be afraid of simple things.
In fact, there is an acronym you will often see in the trading world called KISS.
It stands for Keep It Simple Stupid!
This basically means that a Forex trading system does not have to be complicated. You don’t have to have countless indicators on your charts. In fact, keeping it simple will save you a lot of headaches.
The most important thing is discipline. We cannot stress this enough. Well, yes we can.
If you have thoroughly tested your Forex system with backtesting and have been trading live with demos for at least 2 months, then you should feel confident enough to know that as long as you follow the rules, you will end up making profits in the long run.
Trust your system and trust yourself!
"If you refuse to accept anything but the best, you usually get it."
somerset maugham
First, I decided that this was a swing trading system and we would trade it on the daily chart. Next, I use a simple moving average to help us identify new trends early on.
Stochastic helps us determine whether we can still enter a trade after a moving average crossover, and it also helps us avoid oversold and overbought areas. RSI is an additional confirmation tool that helps us determine the strength of a trend.
After figuring out our trade setup, we determined the risk for each trade. For this system, we are willing to risk 100 pips on each trade. Generally, the higher the time frame, the more risk you should be willing to take, as your gains will typically be greater than if you trade on smaller time frames.
Next, we clarified our entry and exit rules. At this point, we will begin the testing phase with manual backtesting.
Here is an example of a long trade setup:
If we go back in time and look at this chart, we see that according to the rules of our system, this would be a good time to go long.
In order to backtest, you need to write down your entry price, stop loss, and exit strategy. You can then move one candle at a time to see how the trade unfolds.
In this particular case, you'll get some nice points! You can buy yourself some great stuff after this deal!
You can see that when the moving averages cross in the opposite direction, this is a good time for us to exit. Of course, not every deal is going to look so sexy. Some may look like ugly heifers, but you should always remember to stay disciplined and follow the rules of your trading system.
This is an example of a short pending order for the So Easy It Ridiculous system.
We can see that our criteria are met as there is a moving average crossover, the Stochastic is showing downward momentum but has not yet entered oversold territory, and the RSI is below 50.
We will go short at this point. Now we will record our entry price, stop loss and exit strategy and then move the chart forward one candle at a time to see what happens.
The trend proved to be quite strong, with the pair losing almost 800 points before another crossover occurred! Now isn't that easy?
I know you may think this system is too simple to be profitable. The truth is, it's simple. You shouldn't be afraid of simple things.
In fact, there is an acronym you will often see in the trading world called KISS.
It stands for Keep It Simple Stupid!
This basically means that a Forex trading system does not have to be complicated. You don’t have to have countless indicators on your charts. In fact, keeping it simple will save you a lot of headaches.
The most important thing is discipline. We cannot stress this enough. Well, yes we can.
If you have thoroughly tested your Forex system with backtesting and have been trading live with demos for at least 2 months, then you should feel confident enough to know that as long as you follow the rules, you will end up making profits in the long run.
Trust your system and trust yourself!
"If you refuse to accept anything but the best, you usually get it."
somerset maugham
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